RISE with SAP Case Study – U.S. Hospital Network Cuts Cloud Costs by 25%
Background
A major nonprofit hospital network on the U.S. East Coast (serving millions of patients across several medical centers) relied on SAP for finance, supply chain, and HR operations. The healthcare provider’s IT leadership was exploring RISE with SAP as a pathway to modernize its aging on-premise SAP systems.
RISE’s promise of a managed, cloud-based S/4HANA environment was appealing to the lean IT team, which had struggled with infrastructure upkeep.
However, when the initial RISE proposal arrived, the costs were daunting – the subscription fees and bundled services threatened to strain the hospital network’s IT budget, which was already constrained by funding pressures in the healthcare sector.
Challenges
Several challenges emerged as the hospital network evaluated the RISE proposal:
- High Upfront Costs: The multi-year RISE subscription quote was significantly higher than the network’s current annual SAP spend. It included cloud infrastructure, SAP software, and services in one package, but the one-size-fits-all pricing didn’t account for the nonprofit’s tight margins.
- Unneeded Components: The RISE bundle included services and add-ons (like certain SAP cloud extensions and tools) that weren’t immediately useful for the hospital’s operations. Paying for these extras from day one would waste the budget.
- Data Security & Compliance: Being in healthcare, the client had strict requirements for data residency and compliance (e.g., HIPAA). They needed contractual assurances around data handling. The standard RISE contract terms were vague on some of these points.
- Long-Term Commitment: The initial offer locked the network into a 5-year term. They feared being stuck with no escape clause, since SAP’s boilerplate contract offered no mid-term exit or checkpoints.
Faced with these issues, the hospital network turned to SAP Licensing Experts for SAP negotiation support, aiming to secure a more tailored and affordable RISE with SAP deal.
Solution (How SAP Licensing Experts Helped)
- Needs vs. Bundle Analysis: SAP Licensing Experts worked with the hospital’s IT and clinical engineering teams to dissect the RISE Bill of Materials. They identified which components of the RISE offering were truly needed and which could be removed or scaled down. For example, they determined that some advanced analytics tools in the bundle could be excluded initially, as the hospital was not ready to use them in the first phase.
- Cost Justification & Discount Leverage: The team prepared a detailed cost justification, aligning the RISE fees with the hospital’s value generation. By highlighting the organization’s nonprofit status and tight operating margins, they appealed to SAP for partnership pricing. The experts also leveraged benchmarks, showing what similar-sized enterprises (including other healthcare providers) were paying, to argue that a 25% cost reduction was necessary for the deal to be viable.
- Contract Term Flexibility: A critical negotiation point was introducing flexibility into the lengthy contract. SAP Licensing Experts proposed an opt-out clause at the 3-year mark, contingent on performance metrics. They also negotiated caps on annual price increases and the ability for the client to scale users down in case of hospital mergers or divestitures. Getting SAP to budge on contract terms required persistence, but emphasizing mutual long-term success did the trick.
- Security & Compliance Addendums: Given the sensitive nature of patient data, the experts brought the client’s compliance officers into discussions. They secured specific contract addendums detailing data encryption standards, U.S.-only data center assurance, and strict HIPAA-compliant handling of all data under RISE. These legal safeguards were critical for the hospital’s risk management.
- Staged Onboarding: To avoid paying full price from day one, the negotiation introduced a phased onboarding. Core modules would move to RISE in year one, with remaining systems in later years; subscription fees would ramp up accordingly rather than all upfront. SAP agreed to this phased approach, aligning costs with actual usage.
Outcome and Savings
After a focused negotiation, the hospital network achieved roughly a 25% reduction in its RISE fees compared to the initial quote. This equated to millions of dollars saved over the contract term – true SAP contract savings that brought the project within budget approval range.
The final agreement was not only cheaper but also better aligned with the hospital’s needs. Unnecessary components were stripped out, meaning the network only paid for what it would actually use.
The contract also included key flexibility provisions, such as a mid-term review/exit option and scalable user terms, which gave the executive team confidence to proceed. Additionally, enhanced data security clauses provided peace of mind that strict compliance standards would be upheld in the cloud.
With costs under control and risks mitigated, the hospital network’s board gave a green light to the RISE with SAP migration. The CIO and CFO noted that without expert SAP contract negotiation, they would have likely shelved the project due to cost.
Instead, they are now moving forward with a modern SAP platform that will support improved patient care and operational efficiency.
“We knew we needed to modernize, but the initial RISE quote was a show-stopper. Thanks to our advisors, we secured a cloud deal we could actually afford – about a quarter less in cost, with safeguards that let us sleep at night. It transformed SAP from a cost concern into a strategic enabler for our hospitals,” — CFO, U.S. Hospital Network
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